New model could lower housing costs

In January, Meyer Memorial Trust awarded Transition Projects Inc. a $500,000 capital grant to build a 72-unit affordable housing development in North Portland’s Kenton neighborhood. If fully funded, the project will occupy the same site where the city’s newest homeless village, Kenton Women’s Village, opened in June for a one-year term.

Like a homeless village, the development will provide low-cost homes for residents at very-low income levels — people at risk of homelessness.

But compared to a tiny-house community, Transition Projects’ “modular co-housing” development will take a very different approach to driving down housing construction and operating costs.

The complex of two- and three-story buildings will be made of modular components, built off-site. About half the units will be single-resident-occupancy units, known as SROs, which will share common kitchens and bathrooms; the other half will be studios.

Modular construction, small units and shared spaces will make the building cheaper to build and operate compared to a typical apartment project, says Tony Bernal, Transition Projects’ senior director of public policy and funding.

“Affordable housing in Portland is about $200,000 to $250,000 a unit,” Bernal says. “Our model is about $155,000.”

The project, and the Meyer trust program that’s helping to fund it, address a basic financial challenge facing affordable-housing providers: the poorer your residents, the harder they are to affordably house.

A person living on, say, a $1,000-per-month disability check, can afford to pay only about $300 a month in housing costs, according to the standard calculation for how much of one’s income can be dedicated to housing.

In most markets, including Portland’s, a property owner receiving monthly rent of $300 per unit won’t come close to covering a typical apartment project’s monthly operating costs, debt payments and reserve requirements. Even if the owner operates as a nonprofit and the project receives public subsidies, an average unit will need to pull in at least twice that figure, absent scarce federal rent-assistance vouchers, if the project is to be financially feasible, says Michael Parkhurst of Meyer Memorial Trust’s Affordable Housing Initiative.

Bernal hopes to close that gap with the “modular co-housing” model, and by collecting higher rents for the studio units. He expects to be able to rent the SRO units for $289 to $578 per month and still meet monthly costs.

How does that financial picture differ from a tiny-house village? That’s the sort of question that policy leaders such as Parkhurst must answer to provide cost-efficient housing investments, though doing so requires making difficult apples-to-oranges comparisons.

Transition Projects’ anticipated construction cost of $155,000 per unit is high compared to the roughly $3,000 it takes to build one of Kenton Women’s Village’s no-frills sleeping pods, using volunteer labor. And even the paltry rents Bernal hopes to charge aren’t cheap compared to the free rent residents get living in Portland’s homeless villages.

But the Transitions Project development has other cost advantages. Since the nonprofit will purchase the land from the city, the project will operate for decades and won’t require ongoing city subsidies in the form of a free land lease, as Portland’s existing villages do. And in exchange for higher construction costs, it will be able to offer residents plumbing, heating and other basic amenities that villages don’t offer.

As for the average annual maintenance and repair costs of a modular apartment unit versus a tiny home village, that’s an open question.

Could either model, a tiny-house village or a low-rise modular co-housing community, be scaled up to house thousands?

Parkhurst says the jury is still out.

A tiny-house village is “not a super-efficient use of land, versus how many apartment units you could build on the same plot,” Parkhurst says. And the model followed in Portland depends on access to donated land, which is in short supply. Still, he adds, given the region’s housing challenges, “I wouldn’t discard that (model) until we understand more about it.”

The modular co-housing model is “exactly the kind of innovative thinking” about how to lower the cost of housing that Meyer Memorial Trust is seeking to promote, Parkhurst says. But it will only prove itself replicable “if it becomes accepted, and it really works, and is really as inexpensive as they hope.”

One of the editors of this story, Camela Raymond, is employed by Housing Development Center, a consultant on Transition Projects’ modular co-housing project and a Meyer Memorial Trust grant recipient.